GRU documents point to Mayor Ward as source of decision to delay debt issuance, costing GRU $2.9 million

Gainesville Mayor Harvey Ward speaks to JLAC on October 16, 2023

BY JENNIFER CABRERA

GAINESVILLE, Fla. – A recent email sent by GRU CFO Claudia Rasnick calls into question Mayor Harvey Ward’s assertions that he did not direct GRU to delay a bond issuance that cost GRU $2.9 million. Rasnick also countered statements from both Ward and GRU General Manager Tony Cunningham to the Joint Legislative Audit Committee (JLAC) that the bonds were delayed because GRU’s debt reduction plan was not ready.

At the October 16 JLAC meeting, Chair Mike Caruso (R-Boca Raton) seemed skeptical of the reasons for delaying the bond issuance, and Rep. Peggy Gossett-Seidman (R-Highland Beach) made a motion to conduct a follow-up audit on the City, investigating why the bond issuance was delayed and whether Sunshine Laws were violated. The motion appeared to pass in the meeting, but the JLAC Coordinator confirmed to Rep. Yvonne Hinson (D-Gainesville) on October 23 that the motion actually failed because the four State Senators present voted 2-2; one Republican Senator was absent. Rep. Chuck Clemons (R-Newberry) has told Alachua Chronicle that the motion will be made again at JLAC’s November meeting. Alachua Chronicle has not received a response from either the Chair or Coordinator of JLAC.

Email was prompted by memo from City’s financial advisor

Rasnick’s email was in response to a question from Cunningham about a memo from PFM, the City’s independent financial advisor, that City Attorney Daniel Nee reportedly showed Caruso at the meeting; the Gainesville Sun obtained a copy and characterized the memo as “show[ing] GRU’s financial advisor saying the bond swap was a sound financial decision.” Before replying, Rasnick obtained another memorandum from PFM that discussed the delayed debt issuance in detail. That memo concluded that the delay led to a higher interest rate and that the resulting deal was only deemed “fair, market-based” in light of higher interest rates and the uncertainty of GRU’s governance structure. The memo specifically notes that PFM “did not recommend any delay” in March in closing the transactions.

Ward and Cunningham blamed delay on lack of debt reduction plan

Cunningham told JLAC on October 16 that City Commissioners, in one-on-one meetings, had “agreed to not bring the item forward until we had a debt reduction plan.” At the same meeting, Ward told the committee, “I feel that it would have been imprudent and dishonest for us to move ahead with that, at that point, knowing that we were in the process of creating a debt repayment plan at the time and that you all were contemplating a sea change in the way the utilities operated.”

However, under further questioning from Caruso, Cunningham admitted that the debt reduction plan wasn’t a deciding factor in delaying the bond issuance. Caruso responded, “So it just boggles the mind that, knowing we have to [issue the debt], we put it off, knowing that we would pay more money for it.”

Decision to delay made on March 15

The bond issuance was one of four transactions that were solicited in early January 2023 and anticipated to close by the end of March, including three transactions to renew previous debt in the amount of about $265 million and a fourth transaction for new debt of about $151 million that was needed for the renewal and replacement of aging infrastructure across multiple utility systems in 2023 and 2024. Barclays had agreed to issue the new debt, and all four transactions were on track until a decision was made on March 15 to delay the new money bond issuance.

On that date, Cunningham, Rasnick, Ward, and other City and GRU employees gathered at 8:30 a.m. in a standing Thursday meeting between GRU and General Government staff. Alachua Chronicle received a copy of an email sent by Rasnick to PFM at 9:02 a.m., in which she wrote, “The new money part of the April transactions has been asked by the Mayor, as of this morning, to be moved to June for issuance so as not to adversely impact interactions with the state legislature. In other words, no new debt [emphasis in original] while the City is under a microscope. Not sure what the magic about June is, but that is the time frame we have been given.” Rasnick proposed a call with PFM in the email, and a meeting with PFM to discuss the bond issuance was held at 12:30 p.m. the same day.

Between March 15 and April 4, representatives of GRU met one-on-one with City Commissioners. The presentation given in those meetings included all four transactions, with GRU representatives telling the Commissioners that one member of the Commission had directed GRU to delay the new money transaction. In the October 16 JLAC meeting, Caruso asked Cunningham whether “all the Commissioners” had directed GRU “in the same manner as the Mayor? On a one-on-one basis?” and Cunningham said he would “characterize it as ‘They all agreed to not bring the item forward until we had a debt reduction plan.’”

The three renewal transactions were presented to the full City Commission at their April 6 meeting (with an added “NO NEW DEBT” on the summary page of the presentation), and as soon as the agenda item was introduced, Ward said, “Is this new debt?” GRU Director of Accounting & Finance Mark Benton responded, “No… There is no new debt.” After public comment, Ward reiterated again, “It’s not new debt. It’s just changing some of the terms around what we currently have.” The Commission voted unanimously to approve the three transactions. The “new money” bonds were approved at the June 15 meeting

PFM’s first memo

PFM sent a memo to Rasnick on August 8, 2023, stating that the interest rate from TD Bank in the delayed bond issuance, which cost $2.9 million more than the deal considered with Barclays on March 15, was “‘fair’ (even though higher than Barclays’ proposal) given the… overall market and interest rate conditions.” This was the memo that Nee showed Caruso on October 16 in what he told City Commissioners was an attempt to “shed light on some of the questions.”

Read the August 8 memo here.

On October 17, the day after the JLAC meeting, Cunningham asked Rasnick to clarify whether the PFM memorandum supported the decision to delay the bonds from April to June, as characterized in the Gainesville Sun article published that day.

Rasnick responded by email, “The answer is no. Unlike what has been portrayed publicly… PFM stated [in the August 8 memo] that ‘GRU finance was advised to delay the transaction until after June 1, 2023, based on the state’s legislative session schedule.'” According to Rasnick, that conclusion from PFM was based on the email she sent PFM during the March 15 meeting, in which she said the delay had been requested by the Mayor.

Ward, however, told JLAC on October 16, “I am saying that I did not direct anyone to do anything because I do not have the capacity to do that.”

PFM issues updated memo

In an October 20 memo, PFM focused on the “new money” bonds, stating that they had recommended proceeding with all four transactions on March 15 because “In general, PFM recommends proceeding quickly with these transactions, as market interest rate conditions can rapidly change.” PFM added that GRU’s finance team had “moved in earnest” to meet the expiration dates set by the banks “so GRU could lock in these known rates and terms” and that everything had been on schedule to close on the deals in April. 

Read the October 20 memo here.

The PFM memo continues, “PFM did not recommend any delay to closing any of these transactions but on March 15th, PFM was informed by GRU that the new money was to be delayed until June while the other three transactions could proceed as scheduled.” According to PFM, when Barclays was informed about the delay, Barclays warned that “a new higher interest rate might be required.” The other three transactions closed on May 1.

The PFM memo further states that after Barclays “voiced some concerns about the new governance model” in late April and provided a list of questions, PFM contacted TD Bank, which “did not have the same issues as Barclays.” TD Bank issued the bonds, but at a higher interest rate than was previously offered by Barclays.

In her recent email to Cunningham, Rasnick wrote, “To hold up one of four debt transactions is highly unusual.”

Rasnick: Debt reduction plan was unrelated to the bond issuance 

Addressing the statements made to JLAC by Ward and Cunningham about holding up the bond issuance because the debt reduction plan had not been approved, Rasnick wrote to Cunningham, “The debt reduction plan was approved by the Commission on April 13, 2023, four weeks after the March 15, 2023 meeting and nine weeks before receiving Commission approval [for the bond issuance]. Holding the new money bond issuance until June is not supported by these statements… and is illogical following this argument.”

Timeline

According to the documents received by Alachua Chronicle, on March 15 all four bond transactions were on track to close, including the Barclays transaction for the “new money,” when, according to Rasnick, Mayor Ward told GRU not to issue any new debt while the City was under the JLAC microscope. Ward insists he did not direct GRU or any Charter Officer to delay the bond issuance. GRU representatives had one-on-one meetings with the other Commissioners in subsequent weeks, letting them know that “a member of the Commission” had recommended delaying the transaction. The “new money” transaction was not presented to the Commission at their April 6 meeting, and that transaction was approved in June at a higher interest rate, costing GRU $2.9 million. 

Assuming the same motion is presented to JLAC in a future meeting and the motion passes, the State Auditor General will be investigating whether any of this violated Sunshine Laws.

  • Thank goodness for the Alachua Chronical. Before this site all we had was the Gainesville Scum to run cover for the scheming incompetents running our city into bankruptcy.

    • Did you really call someone incompetent when you can’t spell Chronicle correctly?

      • So Christopher, I assume you have never misspelled a word, since you must consider yourself perfect? Give lou and the rest of us readers a break from your arrogance, please!

  • So let’s see, who should we believe? A licensed professional CPA or a lying politician?

  • Where would we be without the Chronicle.

    Thanks to you for all you do to keep the community informed.

  • I watched the meeting and came to the conclusion of Jennifer’s excellent report. Who is Ward really working for, and did he profit from it?

    • Sure something is in it for him. If nothing more, Ward being the “show-horse” to resist the state legislature like rep Hinson. All of these folks want public attention and to possibly be the next Andruw Gillum.

  • Sounds like someone stubbed their toe, our socialistic city Government at its best.

  • I hope Hinson Rawls gets pulled into this conspiracy. It seems like all the Democrat Leaders in Gainesville want the drastic efforts that are being done to salvage GRU , not to move forward. Is it just the fact that they cannot accept their historical failures. This Bond delay deal takes it to another level of questionable management. Buckle up Gainesville, their may be a real shake up removing your inept politicians.

  • If Ward violated the sunshine law he should be held accountable. As to his hesitancy, given the actions of the state in this hostile takeover, that is more than understandable, and the uncertainty that introduced into the bonds, clearly stated in this excellent report – and the lowered credit rating GRU suffered soon after the hostile takeover was accomplished – is on Clemons, DeSantis, the state GOP, and Perry, but none of them were chosen by the citizens of Gainesville to even be involved – they wouldn’t be elected dog catcher there. Who the hell are these creeps and their pretend “board” members who are mostly not legitimate, having failed to meet the qualifications their team created?

    • There was no uncertainty surrounding the issuance of the bonds during the window of time BEFORE the Authority was seated. That’s the point. Everything was in place to issue the bonds (which were a part of the debt reduction plan anyway). The shifting of the bond issuances to a later date placed it into the window of uncertainty, which without GRU’s CFO memo would have left the community thinking Clemons’ bill as the culprit for the extra $2.9 million. How’s that for possible motivation for a delay?

      • ‘Took the ‘motive’ right out of my mouth…..there’s no other reason to explain the date change.

      • Nice mind reading there Ed, but do you have proof of that? Given your election loss to Ward and subsequent cheerleading for the hostile takeover, we can also guess at your motives. We might also wonder if you had won and were now mayor, if you would have similarly favored giving away control of city property to the Newberry state rep and Tallahassee, which did in fact result in a lowering of GRU’s credit rating – would you? Also can you comment on the fact that the “board” is not only illegitimate, but filled with 4 of the 5 so lacking in ethics that they are trying to get away with being unqualified in broad daylight.

        • If he doesn’t have proof I do… Oooohhhh … I’ve got even the city’s answers to the due diligence questions, and get this Barclays expecting to move forward after July 1 so that there was nothing wrong. Jesus Jazzy you act like there isn’t any kind of record that people cannot get. Also just so you know there were many dissatisfied employees while under the thumb of the commission… now they need only be worried about the CEO, and attitudes for some are happier and more relaxed.

  • 2.9 million, way to go Gainesville. Keep voting liberal and you’ll get more of the same.

  • It’s about time this oaf, and his deviant schemes to support the liberal radical agenda and deprive the citizens of good honest government, be prosecuted by the state attorney general. Further, Ward should step down/resign immediately! His outrageous lies to resist the state legislature are laughable. Resign Now Ward!

  • I understand why Ward denied that he’d given a directive that cost the city $2.9 million when he’s not supposed to give directives – he wanted to cover that up. But what did he believe he was gaining by telling GRU to wait on “new money?”

    • Curious: He was seeking to gain:
      1) He wouldn’t have to reveal that they again needed new debt.
      2) He could blame the new debt and increased cost on the bill creating the new GRU structure.

      Obviously a conspiracy with others, another crime!

      Good honest government? NO!

      • One would think that the city attorney, Ms. Saco (an attorney) or Ms. Chesnut (with long experience in government), would have seen that walking around a transaction paperwork package with a ‘Harvey says no’ preface brings up sunshine law issues.

    • Convincing his constituents that the City Commission must keep control of GRU no matter what. Now that they’ve lost control it’s not just about losing the GFT but they will no longer be able to restrain the employees who know what happened or as they say, where the bodies are buried.

      • If only they’d run GRU like a public utility should be run, in the interests of its customers, it wouldn’t have come to this.

        Instead they used GRU as a slush fund, charging millions of extra dollars every year to pad their budget to fund pet projects and also mismanaged the heck out of it – biomass plant in particular.

        So many boondoggles and now Ward has added one more $2.9 million boondoggle.

    • Yes, any DEC candidate or anyone with a DEC connection should not be considered! Get them out of power for good!

  • Does anyone know why the other commissioners aren’t publicly taking a stance or commenting on this ongoing issue?

    Are they just as liable to sunshine law problems? Or did they all agree with the mayor during their one on one meetings with GRU and just now realizing the repercussions of that mistake? Or did they privately dissent and aren’t bold enough to publicly say so? Or are they bound by other privacy agreements?

    Their silence on the fumbled bond issuance, in particular, is very telling. It’s either legal or political…

    • My guess, only a guess, is that they hold these closed-door meetings and make decisions all the time, and usually they don’t get questions on it so they’ve gotten used to doing it and getting away with it.

      And now they’re trying to stay as far away from it as they can.

  • Least we forget that on April 20th the City Commission gave final approval for a solar contract with a private entity to buy 75 MW of power we don’t currently need. Despite members of the public requesting that the Commission hold off on this deal until the new board was empaneled, they were in a big hurry, while at the same time they deliberately delayed issuing new bonds costing GRU another $2.9 Million. Seems like evidence of malfeasance to me?

  • Keep electing leftist ideologues and Gainesville will be at the bankruptcy court next.

  • Always have known Ward simply sucks overall and stinks in his role along with so many others there. Having all the bad actors brought to light and being held accountable is just like a Mastercard commercial, Priceless.

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